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Knowledge Base

No Vacancy: The Consequences of Rent Control

What is rent control?

Rent control is a government-mandated price control on rent within a specific jurisdiction, typically tying future rent increases to a formula that takes into consideration overall cost of living adjustments and some maintenance costs. Rent control doesn’t, typically, reduces rents but rather controls the rise in rents. Under the economic theory, price ceilings, of which rent control is an example, lead to excess demand for the good or service and a shortage of supply for the good or service.

What do economists think of rent control?

In a 2012 IGM Forum – a survey of a panel of economists conducted by University of Chicago’s Booth School of Business –  52% of respondents strongly disagreed with the following statement: “Local ordinances that limit rent increases for some rental housing units, such as in New York and San Francisco, have had a positive impact over the past three decades on the amount and quality of broadly affordable rental housing in cities that have used them.” Moreover, 43% disagreed with the statement. In fact, just 1% agreed or strongly agreed. The panel includes a wide range of economists, including across the ideological spectrum. In general, rent control is one of the few policies whereby economists, regardless of ideology, agree; it doesn’t yield the outcomes it seeks.

What is the solution to housing unaffordability for a region?

The only long-term, sustainable solution of housing unaffordability is to correct the supply and demand mismatch.  This typically means encouraging the development of new housing supply.  If the solution isn’t correcting the supply-demand mismatch, then it will only be a short-term fix and could make the problem much worse.